Cape Town – The fact that an unaffordable nuclear build programme may get the green light was cited by Fitch Ratings which downgraded South Africa’s sovereign credit rating to junk status, said Sanisha Packirisamy, economist at Momentum Investments in a company note on Friday.
Fitch became the second ratings agency to downgrade South Africa to junk status in a matter of one week.
It cited President Jacob Zuma’s overnight Cabinet reshuffle and a potential change in economic policy direction among the reasons for the downgrade.
Fitch also however cautioned that differences over South Africa’s expensive nuclear programme may have contributed to the reshuffle and under the new Energy Minister Nkhensani Kubayi the programme is likely to move “relatively quickly”.
Under the finance ministry of Nhlanhla Nene, who was removed on 9 December 2015, National Treasury said Eskom could not absorb the nuclear programme with its approved guarantees at the time.